The Food industry is one of the most affected when it comes to seasonal demand fluctuations. Seasonality in the food supply chain refers to natural fluctuations in food availability based on the time of year. It generates a temporary imbalance between supply and demand.
Seasonal changes can greatly impact how consumers behave, what foods they consume, and the prices and demands of certain products.
Some fruits and vegetables are only in season during specific times of the year.
Flour and baking supplies tend to sell more during late autumn leading up to the holiday season. At the same time, barbecue sauces and hot dogs are typically in high demand during early summer.
Just as the holiday season or time of year can impact the demand for a product, supply may also vary due to climate patterns, animal breeding cycles, and shipping logistics.
All of these have a direct impact on warehouses. Warehouses have to consider factors like:
1. Existing Space utilization of the food-grade warehouse
2. Scope of expansion for additional storage
3. Technology integration for quality storage
4. Grade of facility in case of long-term storage
5. Proximity of the warehouse to the market
6. Total Costs
Once you understand the impact of seasonality and supply fluctuations on the food industry, you can make smart choices about how much inventory to keep on hand and when to stock up to maintain optimal inventory levels in your food warehouse.
We will explore how seasonality affects food-grade warehouses and what you can do to mitigate the impacts.
Demand Cycles for Seasonal Foods
Just-in-time
In this strategy, you store goods based on the actual business requirement at that particular time.
As there is minimum stock storage involved, you save on warehouse space as well as avoid losses due to spoilage.
The method is more popular among SMEs, as it significantly reduces the capital involved.
This kind of storage is not the best suited for peak seasons when the supply may not be able to meet the demand in real-time.
On-Demand warehouses
Another effective way to manage seasonal variations is to opt for On-Demand warehouses. These are flexible storage options available for short-term rentals. You can rent the warehouse space only when you need to store the excess goods.
You also have the option to choose storage facilities with better features and at more apt locations for your business.
On-Demand warehousing lets you focus on your core business without worrying about the storage aspect. Extra space is available whenever you need it.
Read More: Best Practices for Choosing an On-Demand Warehousing Provider for Your Business
Securing Enough Supply
During supply shock, every other business will compete with yours to procure the available inventory pool. The competition to secure adequate supply for meeting demand peaks will steeply increase the ordering costs.
Instead of responding to the demand peak by racing to the bottom, businesses can consider the following options:
- 1. Partner with local farmers and suppliers to secure a base level of supply ahead of time.
2. Enter into medium or long-term procurement partnerships with suppliers who can help you meet seasonal demands at the current ordering cost levels.
3. Rely on proactive and timely communication if you cannot secure enough supply to meet customer expectations. Customers are more likely to trust a business that is upfront about procurement issues during a supply chain crisis.
Reducing Unwanted Inventory
As most food products have a relatively limited shelf life, it is a best practice for food warehouses to retain relatively little stock between seasons.
Holding a significant amount of off-season stock will unnecessarily increase your inventory carrying costs and lead to excessive food waste or spoilage. It also takes up warehouse space, which could have been for better use.
Focus on reducing unneeded inventory as you approach the off-season. For instance, you may have to carry only a very small level of winter stock during the summer season.
Read More: How to use the warehouse space more effectively?
Accurate Demand Planning
Food suppliers need to plan ahead and predict how much inventory they will need. Some popular foods like ice cream, barbecue meat, and fresh produce like peaches and asparagus change in demand based on the season and weather.
Planning coordination from a centralized point will provide better demand visibility. This is especially true when there are multiple distribution channels to manage total product availability effectively.
It is advisable to keep inventory levels of fresh foods and perishables low to prevent waste caused by product expiration and spoilage.
Technology Integration
To keep up with the latest changes in customer behavior or market trends, food manufacturers and distributors should opt for shorter and more frequent data updates. This will help them track the trends more granularly and accurately.
A Warehouse Management System allows for easy tracking of goods in real time.
Features like Inventory slotting make it possible to track product demand by keeping track of product order updates in real-time.
Utilize strategies such as Demand Sensing to plan and respond to sudden shifts in demand effectively. Demand Sensing is a predictive approach that employs artificial intelligence and real-time data analysis to forecast the market based on the current state of the supply chain.
Demand forecast accuracy is highest for fresh produce when done for shorter time intervals.
Read More: Top Technologies to streamline the operations of Food-grade Warehouses
To Sum Up
It is possible for food storage warehouses to prepare cost-effectively for seasonal demand peaks and ensure year-round inventory supply. Businesses can efficiently deliver their products to consumers by partnering with the right 3PL provider and utilizing the latest warehousing and fulfillment technology.
Cargoz has got you covered with food-grade warehouses approved by the municipality in both Free Zones and mainland locations across the UAE.
They're perfect for short-term storage needs, and the best part? You have better control over your costs!
The warehousing services are very flexible, so you can quickly scale up or down on space without going through long-term lease agreements or shifting entire warehouses for specific seasons.
With efficient stock management, cutting-edge warehousing technology and facilities, and strict adherence to food safety and storage regulations and standards, we help maintain the integrity of your products as they travel through our partner facilities.
If you're looking for the perfect storage solution for your food-grade inventory, contact us today.